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Is it worth refinancing for a 0.25% rate difference?
Bayley Clarke · Mortgage broker on the road · Last checked 24 August 2026 · 4 min read
The short answer
It just depends on what the financial benefit looks like once you factor in the switching costs. When you're changing banks, I budget anywhere between $1,000 and $1,200 per property in related charges. So that 0.25% needs to make up, in interest savings, well and truly more than what it costs to switch.
If the difference saves you $3,000 a year, paying $1,000 to switch is probably worth it. If it only saves you $1,000 a year, you spend the first full year just making back the cost of the move. Same rate cut, two completely different answers, and the only thing that changed was the size of the loan.
The 74 second version. The rest of this page is the detail underneath it.
The whole question is your loan size
People treat 0.25% as if it's a fixed amount of money. It isn't. It's a percentage of whatever you owe, so the same rate difference is worth double the dollars on double the loan. The arithmetic is one line: your balance multiplied by 0.25% is roughly what the difference saves you in interest each year.
Put that number next to what it costs to switch and the decision mostly makes itself. Here's the arithmetic at a few illustrative loan sizes, against a switching budget in the middle of my $1,000 to $1,200 range.
| Loan balance (illustrative) | What 0.25% saves per year, roughly | Time to earn back ~$1,100 of switching costs |
|---|---|---|
| $300,000 | ~$750 | Around 18 months |
| $400,000 | ~$1,000 | Just over a year |
| $600,000 | ~$1,500 | Around 9 months |
| $800,000 | ~$2,000 | Around 7 months |
| $1,200,000 | ~$3,000 | Around 4 to 5 months |
Illustrative arithmetic only, not a quote or an offer of any rate. It ignores that your balance falls over time and your actual costs depend on your lender, your loan and your state. But it's accurate enough to make the decision with, and that's all it's for. The bottom of the table is an easy yes. The top of the table is a year and a half of paperwork to get back to zero.
The costs, and why "well and truly" matters
That $1,000 to $1,200 is my working budget for the related charges that pop up when you move between banks, and it's per property. Two securities, roughly double it. What's actually inside that number is its own question, and it gets its own page: what does refinancing actually cost?
Notice the standard I use isn't "the saving covers the cost". It's that the saving needs to be well and truly more than the cost. A refinance takes effort: documents, a new application, a discharge, new accounts, redirecting your pay. If all that buys you back the switching cost and a few hundred dollars, you've done a lot of admin to roughly stand still. The move has to be worth the move, not just technically positive.
You've got three moves, not one
Switch. When the annual saving clears the switching costs with plenty to spare, move. This is the bottom half of the table above, and the bigger the loan, the less debate there is.
Call your bank and ask them to drop it. A phone call costs nothing and carries none of the switching costs. If they sharpen your rate, you've captured a chunk of the benefit without moving a thing. There's a whole page on how that call goes, but for a 0.25% gap on a modest balance, it's usually the right first move.
Sit tight. Suck it up for a little bit longer until there's a deal that makes more financial sense. That's not giving up, it's refusing to spend $1,000 and a pile of admin on a marginal win. The gap between lenders moves around; a difference that isn't worth chasing today can be worth chasing later, on the same one line of arithmetic.
The honest bit: sometimes the answer is don't refinance
I get paid when loans move. So read this part carefully, because it's the part that costs me money.
- If your balance is small, the maths usually says stay. 0.25% on a modest loan is a few hundred dollars a year against a four figure cost to move. A broker who pushes that refinance is working for their commission, not for you.
- The cheapest fix is one I don't get paid for. Calling your own bank and asking them to drop the rate costs you nothing. For a small gap, do that before you talk to me.
- If you're likely to sell or restructure soon, sit tight. The saving needs time to catch up with the cost. Sell inside the break even window and the refinance never paid for itself.
- Don't refinance for sport. Moving every time someone dangles a slightly smaller number means paying the switching costs over and over. Run the one line of arithmetic each time, and only move when it clears well.
Is refinancing for 0.25% dumb? No. Doing it without knowing your own number is.
Want the arithmetic done on your actual loan?
Bring your balance and your current rate off your statement. I'll put the saving next to the real switching costs and tell you which of the three moves it is: switch, call your bank, or sit tight. If the answer is stay put, I'll say stay put.
No application, no credit check, nothing on your file. Just the numbers.
Next question
What does refinancing actually cost?The other half of the same arithmetic: what it costs to move.
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